- Pembina Pipeline is intending to acquire Inter Pipeline in a friendly all-equity transaction.
- This will initially boost their operating cash flow by approximately 30% and possibly as much as slightly over 50% in the medium-term once their HPC project comes online in 2023.
- Whilst this is positive, on the other hand, it will also see their net debt instantly soar by slightly over 60% and thus this acquisition will push their leverage higher.
- Thankfully, they currently have a healthy financial position that can shoulder higher leverage but this still increases the risks, especially since a significant portion of the value is riding upon the HPC project.
- I believe that downgrading my rating to neutral from bullish is now appropriate following these higher acquisition-related risks.
For further details see:
Pembina Pipeline: Inter Pipeline Sends Debt Soaring And Cash Flow Won't Fully Catch Up